The new management agreement provides that we will reimburse Charter
Communications, Inc. for all expenses, costs, losses, liabilities or damages
incurred by it in connection with our ownership or operation of our cable
television systems. If Charter Communications, Inc. pays or incurs any such
expenses, costs, losses, liabilities or damages, it will be reimbursed. In
addition to any reimbursement of expenses, Charter Communications, Inc. is paid
a yearly management fee equal to 3.5% of our gross revenues. Gross revenues
include all revenues from the operation of our cable systems, including, without
limitation, subscriber payments, advertising revenues, and revenues from other
services provided by our cable systems. Gross revenues do not include interest
income or income from investments unrelated to our cable systems.
Payment of the management fee to Charter Communications, Inc. is permitted
under our current credit facilities, but ranks below our payment obligations
under our current credit facilities. In the event any portion of the management
fee due and payable is not paid by us, it is deferred and accrued as a
liability. Any deferred amount of the management fee will bear interest at the
rate of 10% per annum, compounded annually, from the date it was due and payable
until the date it is paid.
The management fee is payable to Charter Communications, Inc. quarterly in
arrears. If the current management agreement is terminated, Charter
Communications, Inc. is entitled to receive the fee payable for an entire
quarter, even if termination occurred before the end of that quarter.
Additionally, Charter Communications, Inc. is entitled to receive payment of any
deferred amount. The accrual of such management fee commenced on February 23,
Pursuant to the terms of the new management agreement, we have agreed to
indemnify and hold harmless Charter Communications, Inc. and its shareholders,
directors, officers and employees. This indemnity extends to any and all claims
or expenses, including reasonable attorneys' fees, incurred by them in
connection with any action not constituting gross negligence or willful
misconduct taken by them in good faith in the discharge of their duties to us.
Paul G. Allen or certain affiliates of Mr. Allen, own equity interests or
warrants to purchase equity interests in various entities which provide us with
services or programming. Among these entities are High Speed Access, WorldGate,
Wink, ZDTV, LLC, USA Networks and Oxygen Media, Inc. These affiliates include
Charter Communications, Inc. and Vulcan Ventures, Inc., a company founded by Mr.
Allen in 1986 to research and implement his investments. Mr. Allen owns 100% of
the equity of Vulcan Ventures, and is the President, Chief Executive Officer and
Chairman of the Board. William B. Savoy, another of our directors, is also a
Vice President and a director of Vulcan Ventures.
HIGH SPEED ACCESS. High Speed Access is a provider of high-speed Internet
access over cable modems. In November 1998, Charter Communications, Inc. entered
into a Systems Access and Investment Agreement with Vulcan Ventures and High
Speed Access and a related Network Services Agreement with High Speed Access.
Additionally, Vulcan Ventures and High Speed Access entered into a Programming
Content Agreement. Under these agreements, we committed to provide High Speed
Access exclusive access to at least 750,000 homes passed. We can terminate our
exclusivity rights, on a system-by-system basis, if High Speed Access fails to
meet performance benchmarks or otherwise breaches the agreements including their
commitment to provide content designated by Vulcan Ventures. During the term of
the agreements, High Speed Access has agreed not to deploy